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Origins of the Sicilian Mafia: The Market for Lemons

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  • Dimico, Arcangelo
  • Isopi, Alessia
  • Olsson, Ola

Abstract

Since its first appearance in the late 1800s, the origins of the Sicilian mafia have remained a largely unresolved mystery. Both institutional and historical explanations have been proposed in the literature through the years. In this paper, we develop an argument for a market structure -hypothesis, contending that mafia arose in towns where firms made unusually high pro…ts due to imperfect competition. We identify the produc- tion of citrus fruits as a sector with very high international demand as well as substantial fixed costs that acted as a barrier to entry in many places and secured high profits in others. We argue that the mafia arose out of the need to protect citrus production from predation by thieves. Using the original data from a parliamentary inquiry in 1881-86 on Sicilian towns, we show that mafia presence is strongly related to the production of orange and lemon. This result contrasts recent work that emphasizes the importance of land reforms and a broadening of property rights as the main reason for the emergence of mafia protection.
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  • Dimico, Arcangelo & Isopi, Alessia & Olsson, Ola, 2017. "Origins of the Sicilian Mafia: The Market for Lemons," The Journal of Economic History, Cambridge University Press, vol. 77(04), pages 1083-1115, December.
  • Handle: RePEc:cup:jechis:v:77:y:2017:i:04:p:1083-1115_00
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    1. Halvor Mehlum & Karl Moene & Ragnar Torvik, 2006. "Institutions and the Resource Curse," Economic Journal, Royal Economic Society, vol. 116(508), pages 1-20, January.
    2. Frederick van der Ploeg, 2011. "Natural Resources: Curse or Blessing?," Journal of Economic Literature, American Economic Association, vol. 49(2), pages 366-420, June.
    3. Buonanno, Paolo & Durante, Ruben & Prarolo, Giovanni & Vanin, Paolo, 2011. "On the historical and geographic origins of the Sicilian mafia," MPRA Paper 37009, University Library of Munich, Germany, revised 01 Feb 2012.
    4. Smith, Rodney T, 1976. "The Legal and Illegal Markets for Taxed Goods: Pure Theory and an Application to State Government Taxation of Distilled Spirits," Journal of Law and Economics, University of Chicago Press, vol. 19(2), pages 393-429, August.
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    Cited by:

    1. Paolo Buonanno & Ruben Durante & Giovanni Prarolo & Paolo Vanin, 2015. "Poor Institutions, Rich Mines: Resource Curse in the Origins of the Sicilian Mafia," Economic Journal, Royal Economic Society, vol. 125(586), pages 175-202, August.
    2. Giuseppe De Feo & Giacomo Davide De Luca, 2017. "Mafia in the Ballot Box," American Economic Journal: Economic Policy, American Economic Association, vol. 9(3), pages 134-167, August.
    3. Barone, Guglielmo & Narciso, Gaia, 2015. "Organized crime and business subsidies: Where does the money go?," Journal of Urban Economics, Elsevier, vol. 86(C), pages 98-110.
    4. Rowena Gray & Gaia Narciso & Gaspare Tortorici, 2017. "Globalization, Agricultural Markets and Mass Migration," CReAM Discussion Paper Series 1713, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
    5. Acemoglu, Daron & De Feo, Giuseppe & De Luca, Giacomo, 2017. "Weak States: Causes and Consequences of the Sicilian Mafia," CEPR Discussion Papers 12530, C.E.P.R. Discussion Papers.
    6. Paolo Pinotti, 2012. "The Economic Costs of Organized Crime: Evidence from Southern Italy," Working Papers 054, "Carlo F. Dondena" Centre for Research on Social Dynamics (DONDENA), Università Commerciale Luigi Bocconi.
    7. Aquilante, Tommaso & Maretto, Guido, 2016. "Cooperation in Criminal Markets," MPRA Paper 75949, University Library of Munich, Germany.
    8. Michele Battisti & Giovanni Bernardo & Andrea Mario Lavezzi & Giuseppe Maggio, 2019. "Shooting down the price: evidence from mafia homicides and housing market volatility," Working Paper series 19-05, Rimini Centre for Economic Analysis.
    9. Tomás E. Murphy & Martín Rossi, 2017. "Following the Poppy Trail: Causes and Consequences of Mexican Drug Cartels," Working Papers 130, Universidad de San Andres, Departamento de Economia, revised Dec 2017.
    10. repec:kap:ejlwec:v:46:y:2018:i:3:d:10.1007_s10657-018-9600-0 is not listed on IDEAS
    11. repec:eee:irlaec:v:56:y:2018:i:c:p:142-159 is not listed on IDEAS
    12. Luigi Balletta & Andrea Mario Lavezzi, 2019. "The Economics of Extortion: Theory and Evidence on the Sicilian Mafia," Discussion Papers 2019/242, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    13. Guerriero, Carmine & de Oliveira, Guilherme, 2014. "Extractive States: The Case of the Italian Unification," MPRA Paper 70916, University Library of Munich, Germany, revised 13 Apr 2016.
    14. Pietro A. Bianchi & Antonio Marra & Donato Masciandaro & Nicola Pecchiari, 2017. "Is It Worth Having the Sopranos on Board? Corporate Governance Pollution and Organized Crime: The Case of Italy," BAFFI CAREFIN Working Papers 1759, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    15. Paolo Buonanno & Ruben Durante & Giovanni Prarolo & Giovanni Prarolo, 2013. "Rich Mines, Poor Institutions: Resource Curse and the Origins of the Sicilian Mafia," Sciences Po publications info:hdl:2441/16jvuuvsuc9, Sciences Po.
    16. Paolo Buonanno & Ruben Durante & Giovanni Prarolo & Paolo Vanin, 2015. "Poor Institutions, Rich Mines: Resource Curse in the Origins of the Sicilian Mafia," Economic Journal, Royal Economic Society, vol. 125(586), pages 175-202, August.

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    JEL classification:

    • P48 - Economic Systems - - Other Economic Systems - - - Political Economy; Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

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